IKEA Looks to Penetrate the US Market - Case Study Example

Section/# Questions and Answers Q1) When a firm seeks to grow and/or to penetrate a new market, there are a numberof determinants that must be understood and actuated upon in order for a successful result to be realized. Although change and realization of the problems that are preventing a firm from a more successful result has a litany of theories and approaches that have sought to define the best way that an effective business or leadership decision should be engaged with, this brief analysis will utilize the “Marketing Decision Making and Case Analysis” rubric which can be defined by the following acronym: DEFINE. As such, the author of this brief marketing case study will seek to implement this approach with regards to IKEA’s proposed expansion and further integration/penetration within the United States market. According to the previously mentioned chapter’s rubric, the first letter of the DEFINE acronym states that the firm in question must define the problem. Obviously, this may seem as a simple approach; however, the reader would likely be horrified to know just how many very large and otherwise successful firms had sought to work out the problem that they saw as represented without seeking to define or recognize the full scope of the ancillary and tangential issues that were acting on the exemplification of the problem within the firm. With relation to IKEA, the definition of the problem will herein be discussed. IKEA is faced with a situation in which although its product line is understood and appreciated, there is a great deal more market engagement and customer utility that the firm can ultimately be gained should the popularity of IKEA in the United States begin to mirror that what is experienced in Europe and other markets in which it competes. As the rubric of the article in question states, the second determent in the “DEFINE” acronym is that of enumeration of the decision factors. This of course follows that once the issue has been defined the next step would be to focus upon the key hinge points that would most assist in providing a plan of action with regards to future steps. In the case of IKEA, this automatically references the ability of enumeration with regards to recognizing the key strengths and weaknesses that exist within the firm. Although one may be convinced that they should focus exclusively upon the weaknesses and outright ignore the strengths due to the fact that they are already in existence and bear little correlation to the issue at hand, this is very much the wrong approach. Rather, the correct approach of the enumeration phase is to consider both strengths and weaknesses simultaneously as a means of ensuring that weaknesses are appropriately listed so that actionable plans can be drawn to minimize or reduce entirely their existence and plans can be effected which lead to retention of the key strengths that are noted. For the case of IKEA, the key weaknesses that the article has illustrated revolve around their strong focus on sustainability, brand image, added amenities, do it yourself approach, corporate structure, and low cost structure. Likewise, the key weaknesses that should be enumerated upon are the limited promotional expenditures, weak online support, limited customization, the do it yourself approach being seen as cheap and law quality, economic conditions, demand for convenience, and the popularity of stylish cutting edge sustainable products. Within the given rubric, the next step would be to consider the relevant information that the preceding two steps have detailed. Within the case of IKEA the relevant information is the fact that the firm has been considered by many within its customer base as representing the same quality products that they might purchase at Wal-Mart or Target. Similarly, the firm should realize the most relevant information that the preceding steps of analysis has yielded is the fact that its current “thrifty” marketing concept will likely do little to re-engage customer opinion and/or generate a higher level of sales than is currently being realized within the current model. However, as the rubric represented in Chapter 3 notes, the individual or group performing such a level of analysis must actively resist accepting everything that is represented in the previous steps as facts; instead, these should be used as guide posts for helping the firm and its representative shareholders plot a course that best maximizes profitability while carefully accessing the factors and detriments that have thus far been represented. As a means of furthering this examinatory rubric, the authors of Chapter 3 state that the next phase in such a decision matrix is to identify the best alternative. Although the key weaknesses that the firm engenders, with respect to customer outlook, have been previously denoted, the fact of the matter is that seeking to tackle any one of these would be insufficient to furthering the utility of the brand or realizing an overall increase in profitability. Rather, what can and should be realized from such a level of analysis upon IKEA is the fact that its United States customers are merely somewhat unfamiliar with the product, concept, and core usefulness of the offerings that the firm represents. In this way, rather than choosing to focus on a single drawback or weakness that would otherwise represent strength in another market, the analysts would do well to note that the underlying common denominator in many of the “weaknesses” that have been represented is due to the fact that the customer base does not comprehend the product or is otherwise unable to differentiate it from other low-cost alternatives that currently exist within the market and demonstrate exceptionally poor quality. As a function of this understanding, it is therefore incumbent upon the firm to seek to re-engage the otherwise hardly functional marketing branch and seek to integrate a more full and complete understanding of what the firm stands for, what it can deliver, and at what overall cost to the prospective American client. As a function of this identification of the best alternative, the next step involves developing a plan for implementing the chosen alternative. As one might expect, this implementation step is one of the most difficult and as is the case with IKEA, it is also the most challenging. This is of course due to the fact that IKEA has for years traditionally held its marketing budget at a minimum and chosen instead to focus its allocation of available funding to development of new product offerings, new designs, and new store openings. However, such an approach will need to be honed is the given set of issues that are faced will be settled in a satisfactory manner. Last of the DEFINE mechanisms is that of evaluation of the decision and the decision process. Once a particular path is decided upon and sought to be implemented, the framers of such an idea will find it incumbent upon them to set up a series of evaluation guidelines. As is the case with IKEA, the evaluation guidelines will need to be concentric upon the level to which the marketing scope and activities are actually engaging with the target market and effecting a re-thinking of the brand. Although this is a difficult task to achieve, it can be set out to be accomplished by a careful evaluation and processing of the inputs that are received throughout the various stages of the process. In other words, rather than waiting until the implemented plan has completed or is well under way, the shareholders can seek to draw a level of inference upon and evaluate the overall decision at regularly scheduled intervals as a means of ensuring that the change is well tracked, well considered, and taking into account a range of eventualities. Q2) Speculate on what will happen at IKEA stores as they are adapted to fit local tastes. Is the company’s trade-off of service for low cost sustainable in the long term? With regards to the way in which IKEA looks to transform its stores to more appropriately fit the local demographic and dynamic, it is the opinion of this author that such an approach will not lead to the level of success that the framers anticipate. Due to the fact that IKEA’s ultimate marketing tool currently is that of the internet, a broad cross section of its products will be viewed via its online catalogue. However, if such a catalogue does not closely or precisely mirror the store offerings that are exhibited on site, the potential customer could be highly frustrated and/or exasperated (Whitten 2012). Although it seems as a wise arena of expansion to directly target the many miniature markets that exist within the United States market as a means of increasing overall sales, such a plan could, and likely will, eventually backfire as a level of standardization of products and brand image is lost to a seemingly ever increasing array of region specific product offerings. Secondly, with regards to the sustainability of IKEA’s service for low cost, it is the belief of this reviewer that if properly engaged with such a prospect has the capacity to continue well into the future and provide the firm with a high degree of profitability. Although it is of course impossible to state with certainty the direction that the firm will take within the next few years, using other firms that have pursued similar goals and succeeded to a high degree as a barometer, the reader can make the informed statement that as long as such a practice is valued and sought to be retained, it is highly likely that the model can and will continue to exist within the business environment as an example of how to maximize customer utility and minimize cost. References Whitten, N., Cunningham, D., & Pilkington, L. (2012). IKEA unpacks regional schemes. Estates Gazette, (1219), 1. Read More